October 14, 1990

ON THE eve of ETRE, the first European Technology Roundtable Exhibition in France — which will attempt to get North American, European and Asian industry leaders talking to each other about the challenges of a global marketplace — I thought it would be interesting to look at the ingenuity that one European firm is bringing to the table in anticipation of December 31, 1992, when the European Unification Plan goes into effect.

There are many things about the Unification Plan that U.S. semiconductor firms don’t understand, according to Dutch entrepreneur Joep van den Nieuwenhuyzen (we will call him Joep). The Plan itself is incredibly complex, and full of agreements, compromises and rules that business partners must comply with in order to do business with the European Economic Community, or EEC, of 1992.

Two big issues for semiconductor companies are “country of origin” and “duties.” Many U.S. chip firms believe the only way they can afford to sell semiconductors in 1992 Europe — that is, without being socked with enormous export duty on the finished, full-market value of each chip — is to create them from scratch in Europe. This means building or renting time in an expensive European foundry to produce the thin, circular slabs of silicon called wafers, which are then assembled into chips and sold.

But according to Joep, who just happens to own a subcontract chip assembly and test facility in the Netherlands called Eurasem, country of origin is only part of the equation. Eurasem is headed by California native Dean Strausl, a semiconductor packaging expert who moved to the Netherlands five years ago. Both have studied the Unification Plan carefully and have formulated a tight, savvy strategy for why U.S. chip firms — especially the smaller ones — should sign on now to effectively compete in the European chip market.

What they believe may save the day for U.S. companies who can’t afford to rent time from, let alone build, European foundries, is the less-publicized issue of “content” — that is, what goes into a product after it hits European shores.

Strausl says if U.S. chip manufacturers ship their wafers to Europe for final test and assembly, they spare themselves the vast cost of building a fabrication facility, and also don’t have to elbow their way into European wafer fabs, which I suspect are about to become enormously popular. By creating wafers at home, they pay a 9 percent duty on each wafer they send to Europe, instead of 14 percent on full value of the finished chip.

In addition, they say, it’s likely the EEC will allow vendors to discriminate in favor of suppliers selling items with more than 50 percent European content — regardless of origin. This refers to how much of the monetary value for the complete product was added in Europe, and includes labor. “Though “always’ is a dangerous word, I’d say that 90 percent of the time, the content we add with test and assembly is more than 50 percent,” says Strausl.

Joep and Strausl recently spent two weeks touring Silicon Valley, explaining the benefits of European test and assembly, to local chip firms. They found that most have been doing their level best to not think about the 1992 Europe a nanosecond before they have to — note that of 193 U.S. semiconductor firms, only two or three are active in Europe — but Eurasem’s cage-rattling is doing some good.

In fact, custom chip houses LSI Logic and VLSI Technology, as well as Texas Instruments, have already signed on with Eurasem. The duo visited “everybody who would see us” — including Chips & Technologies, Cirrus Logic, AMD, Signetics — trying at least to get them to spend the $40,000 or so required to run what’s called a “qualification lot” of chips through their facility to test for quality.

The Japanese, of course, haven’t wasted any time getting involved. “They’ve already built their own fabs, staffed with their own people, and most of the time with their own equipment — using European grant money,” says Strausl. “The Americans could have done that too, but (the Japanese) got to the money earlier.”

Strausl and Joep visited U.S. firms in the spring and were met with a similar attitude. “We tried to explain to them that 1992 was not just seven quarters away, but it was a process — a 1,500-step process — and more than 1,000 of those steps have already been taken,” says Joep. “We told them if they waited until December 31, it was absolutely too late. If they wanted to do something, they should be there now and get in line, otherwise it will be too late, all the slots will already be taken. The idea got into their minds — they sorted it through, and we found that on this visit, they were much more receptive to what we had to say.”